In January 2017 Congress will have an opportunity to reauthorize the Higher Education Act, which is the primary law governing federal higher education programs, including federal student loans. This bill is up for reauthorization every 5 years and was due in 2014, but has been stalled up until this point.
Reauthorization is a chance for policymakers to evaluate current legislation, make improvements needed, add new programs, and review funding.
A few of the student loan bills discussed in recent months have progressed through at least one chamber of Congress and although they have not become laws, have a chance of going further. Here is a look at the current pending legislation and how it could affect student loan borrowers moving forward.
- Empowering Students Through Enhanced Financial Counseling Act: This legislation would require colleges to provide annual counseling for first time federal loan borrowers. It would also expand the current requirements to include all federal Pell Grant recipients and parent PLUS loan borrowers. The U.S. Department of Education is also looking into student loan counseling in a separate initiative.
- Simplifying the Application for Student Aid Act: The Free Application for Federal Student Aid (FAFSA) has usually relied on the income tax from the previous year only. This bill would ensure that students can complete their FAFSA using their income tax returns from 2 years prior to the application date. This is known as the “prior-prior year”. This bill would also make it easier for borrowers to supply income data directly from their tax returns from the Internal Revenue Service (IRS) and would require the FAFSA to become available on a mobile application.
- Stop Taxing Death and Disability Act: This bill has not passed either chamber of Congress but both the House and Senate did pass it through for consideration. Currently, federal student loans are eligible for forgiveness in cases of death or disability but the taxes must be paid on the amount forgiven which can end up being a financial burden to either the individual or their family. This bill would stop any taxes on forgiven student loans if the borrowers dies or becomes disabled.
- Several employer-led student loan repayment plans: This list includes the Employer Participation in Student Loan Assistance Act, the Student Loan Employment Benefits Act of 2016, the HELP for Students and Parents Act, and the Student Loan Repayment Assistance Act of 2015. These plans would create incentives for employers to offer student loan assistance programs to help their employees pay off or better manage their student loan debt. The idea is to do this by creating tax incentives for employers that make loan payments on their employee’s behalf or reimburse employees for payments made. These bills have not passed either chamber of Congress.
Common issues for discussion continue to arise in both major political parties, such as streamlining the regulations imposed on colleges, increased transparency for college costs, and simplifying loan repayment programs.
Congress has been deeply divided in recent years so the outcomes of these bills are unclear and largely depend on the the layout of the new Senate coming in January. One example of popular legislation falling victim to bipartisan politics is the Bank on Students Emergency Loan Refinancing Act, introduced by Sen. Warren as a bout for a federal alternative to student loan refinancing; this bill did not gain support in any Congress chamber, excluding it from this list.